Quantifying drought's economic impacts has been key for decision-making to build future strategies and improve the development and implementation of proactive plans. However, climate change is changing drought frequency, intensity, and durability. These changes imply modifications of their economic impact, as longer droughts result in greater cumulative economic losses for water users. Though the longer the drought lasts, other factors also play a crucial role in its economic outcomes, such as Infrastructure capacity (IC), the Amount of Water in Storage (AWS) in reservoirs and aquifers, and short- and long-term responses to it. This study proposes and applies an analytical framework for the economic assessment of long-run droughts, assessing and explaining central Chile megadrought economic effects through the factors that begin to influence the economic impact level in this setting. High levels of both IC and the AWS, as well as short- and long-term responses of water users, allow for high resilience to long-run droughts, tolerating extraordinary water disruption in its society with relatively low total economic impacts. Despite this adaptability, long-term droughts bring places to a water-critical threshold where long-term adaptation strategies may be less flexible than short-term strategies, escalating the adverse economic effects. This fact suggests that the economic evaluation of megadrought needs to focus on future tipping points (substantial water scarcity). The tipping point depends on the IC, how water users manage the AWS, and adaptation strategies. Establishing the tipping point should be a priority for future interdisciplinary research.

The economic effects of climate change on agriculture have been widely assessed in the last two decades. Many of these assessments are based on the integration of biophysical and agroeconomic models, allowing to understand the physical and socio-economic responses of the agricultural sector to future climate change scenarios. The evolution of the bio-economic approach has gone through different stages. This review analyses its evolution: firstly, framing the bio-economic approach into the context of the assessments of climate change impacts, and secondly, by reviewing empirical studies at the global and European level. Based on this review, common findings emerge in both global and regional assessments. Among them, the authors show that overall results tend to hide significant disparities on smaller spatial scales. Furthermore, due to the effects of crop prices over yield changes, several authors highlight the need to consider endogenous price models to assess production impacts of climate change. Further, major developments are discussed: the progress made since the last two decades and the recent methods used to provide insights into modeling uncertainties. However, there are still challenges to be met. On this matter, the authors take these unresolved challenges as guidelines for future research.